The opinion of the court was delivered by: Denny Chin, D.J.
In September 2003, plaintiff Kyriakie Sarafoglou brought a qui tam action on behalf of the United States, alleging, inter alia, that defendants violated the False Claims Act (the "FCA"), 31 U.S.C. § 3729 et seq., by (1) submitting false claims to obtain federal research funds, and (2) retaliating against her when she expressed concerns to her supervisors about the false claims. After two years of investigating the allegations, the United States partially intervened in the case in June 2005.
At the same time that the United States decided to intervene, it also reached a settlement with defendant Weill Medical College of Cornell University ("Cornell Medical"). (Tiska Ex. H). The settlement released Cornell Medical and the individual defendants from certain claims under the FCA. (Id. ¶ III.3). Defendant New York-Presbyterian Hospital ("NYPH"), an affiliate of Cornell Medical, was not covered by the settlement agreement. (Id.). Because the case was brought by Dr. Sarafoglou under the qui tam provisions of the FCA, she received a share of the settlement.
Notwithstanding the settlement, Dr. Sarafoglou served an amended complaint against defendants in October 2005, pursuing claims that she asserted were not covered by the settlement agreement. (Compl. ¶¶ 11, 13).*fn1
Defendants move to dismiss the first amended complaint, arguing, inter alia, that plaintiff's claims: (1) are barred under the principles of res judicata; and (2) do not meet the pleading standards imposed by Rule 9(b) of the Federal Rules of Civil Procedure.
Defendants' motions to dismiss are granted in part and denied in part.
Under the qui tam provisions of the FCA, private persons may bring civil actions for violations of § 3729(a). These suits are brought in the name of the Government and the plaintiff, or "relator," must provide the Government with a copy of the complaint and written disclosure of all material evidence and information. 31 U.S.C. § 3730(b)(2). The complaint remains under seal for at least 60 days; during that time the Government decides to either: a) proceed with the action; or b) decline to take over the action, leaving the relator with the right to conduct the action. 31 U.S.C. § 3730(b)(4). "Partial interventions are allowed," United States v. St. Joseph's Reg'l Health Ctr., 240 F. Supp. 2d 882, 888 (W.D. Ark. 2002) (citing United States ex rel. O'Keefe v. McDonnell Douglas Corp., 918 F. Supp. 1338 (E.D. Mo. 1996)), where the Government intervenes as to certain claims, see, e.g., United States ex rel. Tillson v. Lockheed Martin Energy Sys., Inc., No. Civ. A. 5:00CV-39-M, Civ. A. 5:99CV-170-M, 2004 WL 2403114, at *3 (W.D. Ky. Sept. 30, 2004), or as to certain defendants, see, e.g., Klaczak v. Consol. Med. Transp. Inc., No. 96 C 6502, 2005 WL 1564981, at *1 (N.D. Ill. May 26, 2005). If the prosecution is successful, the relator is entitled to receive some of the proceeds. 31 U.S.C. § 3730(d).
For purposes of this motion to dismiss, the facts as alleged in the amended complaint are assumed to be true.
1. Federal Funding for Clinical Research
Each year, the federal government distributes more than $1 billion in research funds to a network of general clinical research centers ("GCRCs"). (Compl. ¶ 4). The funds are distributed through a division of the National Institutes of Health ("NIH") to provide clinical researchers and scientists with resources to conduct research to improve human health. (Id. ¶¶ 4, 5).
To obtain federal funding, a GCRC must submit an application to the NIH. GCRCs are funded in five-year cycles, with continued funding dependent upon competitive renewals. (Id. ¶ 32). Each year during the five-year cycle, however, the entity receiving the research grant must apply for approval for continuation of the grant. (Id.). The amount of funding is determined by the applicant's projections of the activity expected for each research protocol. (Id. ¶ 35).
From 1968 to 2004, Cornell Medical operated a GCRC called the Children's Clinical Research Center (the "CCRC"). (Id. ¶ 7). Focusing on pediatric clinical research, Cornell Medical received a grant from the NIH for approximately $23 million for the period December 1, 1998 through November 30, 2003 (NIH Grant No. 5M01RR006020) ("Grant 5M0"). (Id. ¶ 32). Cornell Medical also received a grant of approximately $2.6 million for the period July 1, 1997 through June 30, 2002 for certain clinical research projects on androgen metabolism (NIH Grant No. HD00072) ("Grant HD0"). (Id.). In all, Cornell Medical received at least $25 million in federal funding from 1998 to 2003. (Id. ¶ 7).
2. False Claims to Obtain Federal Funds
Defendants submitted false claims to obtain federal funding by: (1) knowingly overstating the projected activity of certain research protocols to obtain more funding (id. ¶¶ 41-74); (2) knowingly miscategorizing research patients, both by enrolling certain patients under specific research protocols --even though they did not meet the medical criteria for inclusion -- and also by assigning patients the wrong billing category (id. ¶¶ 75-99); and (3) knowingly misusing grant funds designated for certain laboratories in violation of NIH guidelines (id. ¶¶ 100-05).
Shortly after joining the CCRC as an assistant professor of Pediatric Medicine in July 2001, Dr. Sarafoglou uncovered the misuse of NIH resources by the CCRC. (Id. ¶¶ 10, 106, 110). As a result, in spring 2002, plaintiff presented her concerns to Dr. New, then program director of the CCRC and Dr. Sarafoglou's direct supervisor. (Id. ¶ 111). After plaintiff presented these concerns, Dr. New and Cornell Medical "exclud[ed] her from meetings, solicit[ed] complaints about her from other individuals within the CCRC and NYPH, and recommend[ed] that she receive an 'administrative referral' that would blemish her career." (Id. ¶ 112).
In addition to speaking to Dr. New about her concerns, on or about September 10, 2002, plaintiff submitted an internal complaint to Dr. Gerald M. Loughlin, who had replaced Dr. New as chair of the Pediatric Department of NYPH. (Id. ¶ 114). The submission detailed the CCRC's misuse of government funds. (Id.). This submission led Dr. David Hajjar, vice provost and dean of the Graduate School of Medical Sciences at Cornell Medical, to appoint Dr. Adam Asch to investigate Dr. Sarafoglou's allegations. (Id. ¶ 116).
During this investigation, Dr. New routinely blocked Dr. Sarafoglou's patients' appointments, removed her from the pediatric endocrinology division attending on-call schedule, and referred metabolic patients to doctors at other hospitals instead of to her. (Id. ¶ 117). Moreover, plaintiff no longer received timely notice of institutional regulatory meetings, and she was locked out of file drawers in her office that contained basic information necessary to her duties as the research subject advocate at the CCRC. (Id.). Dr. Sarafoglou's complaints of retaliation to Dr. Loughlin went unheeded. (Id. ¶ 118).
On November 4, 2002, a report was issued by Dr. Asch on the investigation (the "Asch Report"), concluding that there was no merit to Dr. Sarafoglou's allegations. (Id. ¶ 119). Dr. Sarafoglou submitted a response to Dr. Hajjar refuting the findings of the Asch Report, and urging Dr. Hajjar to revisit the issues raised in the investigation. (Id. ¶ 121). On December 12, 2002, Dr. Loughlin of Cornell Medical notified Dr. Sarafoglou that she was being removed from her position as research subject advocate. (Id. ¶ 122).
On January 7, 2003, plaintiff filed a complaint with the NIH alleging misconduct and financial fraud. (Id. ¶ 123). Soon after, Dr. Sarafoglou was relieved from her position within the Division of Pediatric Endocrinology and was reassigned to Cornell Medical's resident group practice. (Id. ¶ 124). This constituted a demotion that impaired plaintiff's ability to conduct clinical research. (Id.). On July 1, 2003, Dr. Sarafoglou was given written notice that her faculty appointment as assistant professor of pediatrics at Cornell Medical would not be renewed upon its expiration on June 30, 2004. (Id. ¶ 127). Dr. Sarafoglou performed her duties in no less than a satisfactory manner at all relevant times. (Id. ¶ 109).
Plaintiff filed a sealed complaint against Cornell Medical, the individual defendants, and NYPH under the qui tam provisions of the FCA in September 2003 (the "Original Complaint"). (Tiska Decl. Ex. D). The Original Complaint alleged that the defendants made false statements to the United States to obtain federal research funds (id. ¶¶ 31-103), and further, that these defendants retaliated against Dr. Sarafoglou when she told her supervisors that she was concerned about the misrepresentations (id. ¶¶ 104-26).
In June 2005, approximately two years after the Original Complaint was filed, the Government filed a Notice of Election to Intervene, in which it notified the Court that it was electing "to partially intervene and proceed with this action" against Cornell Medical. (Tiska Decl. Ex. F). In its Complaint-In-Intervention, the United States asserted claims against Cornell Medical alone, for violations of the FCA, common law fraud, unjust enrichment, and payment made under mistake of fact.
(Tiska Decl. Ex. G. ¶¶ 134-56).
At the same time that the United States filed its Notice of Election to Intervene, it also submitted a Stipulation and Order of Settlement and Dismissal (the "Settlement Agreement") that it entered into with Cornell Medical. (Tiska Decl. Ex. H). According to the Settlement Agreement, "the United States and [Cornell Medical] mutually agree to reach a full and final settlement and compromise of the claims that the ...